TMCNET eNEWSLETTER SIGNUP

(Nation (Kenya) Via Acquire Media NewsEdge) The market has failed. The Communications Authority of Kenya has called for tough regulations before allowing two telecommunications companies to buy yuMobile. The telco, which had significantly cheaper call rates, decided to hightail it out of the country after failing to turn a shilling.

The deal confirms that, uncontrolled, the market will not work. It will be eroded and more people will increasingly be herded into tighter pens controlled by service providers.
It is telling that companies with lower prices are being beaten by companies that charge more due to the network effect. Having a large customer base ensures that you have more customers joining your network to take advantage of. It also stops your customers from migrating to other networks.

The network effect is so powerful that the market leader can charge the highest mobile money transaction and call rates and still maintain an unassailable lead.

The mobile termination rate, which favours those with more customers, further bolsters the bottom line of those that are already established.

The refusal to share infrastructure like base transmitting stations means that it will be impossible for any entrant who lacks deep pockets or a sadomasochistic attraction to losses to build a network that could remotely challenge the top two service providers.

With one service provider out for the count and another one reeling, we can say that the Kenyan mobile market is effectively sealed off to all new entrants.
Whoever comes into the market will be forced to pay several hundred millions annually to current players with already established subscribers. I also expect the new rules put out by the communications regulator to be sidestepped. It should not escape our attention that the government is a shareholder in two service providers and, often enough, its interests and those of the service providers coincide.

I have always been distrustful of the market. A market left to its own devices implodes or tends towards monopoly. Free markets make profits but monopolies guarantee super profits.

Free market is a moral issue, but the market looks sealed, with the gates too high to be scaled by even conglomerates from other countries. The current mobile phone frequencies used cannot be expanded, which is why it is crucial that we make market entry fair.

The minimum we should do is ensure that any migration to 4G platforms is done on a more collaborative model as the costs of each company running base stations is too high.

The communication authority's idea of regulation is more of a gesture than real action. The laws seem to have been surpassed by the actual scale and size of the telephony business. For instance, fined a company that makes close to Sh400 million daily only Sh500,000 for having a poor voice network. Companies that are fined are able to roll with the punches.

The government needs effective regulation that lies between giving smaller companies a chance and ensuring that large concentrations of power are broken up.

We should all be against concentrations of market power by the state or private companies as more often than not, it will be abused.